Royal Bank of Canada (TSX:TSX:RY) (RBC) announced that it has entered into an agreement to purchase HSBC Bank Canada (HSBC Canada) for an all-cash purchase price of C$13.5 billion.
HSBC Canada has C$134 billion in assets as of September 30, 2022, approximately 130 branches and 4,200 full-time equivalent staff. It accounts for about 2% of Canadian deposits and mortgages.
In a statement, RBC said the acquisition would position RBC as the bank of choice for globally connected clients.
"HSBC Canada offers the opportunity to add a complementary business and client base in the market we know best and where we can deliver strong returns and client value given our financial strength and award-winning service,” commented RBC CEO Dave McKay.
"This also positions us as the bank of choice for commercial clients with international needs, newcomers to Canada and affluent clients who need global banking and wealth management capabilities,” he added.
All of HSBC Canada’s earnings from June 30, 2022, through close will accrue to RBC, the bank said.
The purchase price of C$13.5 billion represents a 9.4x multiple of HSBC Canada’s estimated 2024 adjusted earnings of C$1.4 billion, assuming fully realized expense synergies.
RBC said on this basis it expects the acquisition to be approximately 6% earnings per share accretive relative to 2024 consensus estimates for RBC.
The transaction is expected to close by late 2023 subject to customary closing conditions.
At midday, RBC's shares were down 0.2% at about C$133.